The APA Is Not A Hammer

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Professor Bryan Camp follows up from his post yesterday, as he explores the history of the APA and tax regulations to support his view that all tax regulations are not legislative rules under the APA. For Professor Hickman’s post, see It’s Time To Let Go: Treasury Regulations Are Not Interpretative Rules. While this issue may seem a bit academic, it is important, as litigants increasingly challenge the procedural validity of tax guidance in cases like Oakbrook Land Holdings v Comm’r and Hewitt v Comm’r. Les

Kristin Hickman loves the APA.  To channel Jed Rakoff, it’s her Stradivarius, her Colt 45, her Louisville Slugger, her Cuisinart, and her True Love.  It’s her Hammer, her righteous Mjölnir

And when you have a hammer, everything looks like a nail.  Including ALL Treasury regulations.  This is a follow-up post from yesterday to explain why I disagree with Kristin’s contention that ALL Treasury regulations are “legislative” for APA purposes. 


To recap: we are concerned with the question of how must Treasury regulations be promulgated to be in conformity with the APA.  To answer that question, Kristin starts her analysis with the APA text.  All agencies must conform to the APA.  It’s a hammer.  Kristin has spent her academic career looking for a unified theory of administrative law and she views the APA as the enforcement mechanism to whack all the governmental agencies that pop up their unruly heads.  Agencies that do not conform to a strict reading of the APA must be claiming to be “exceptional” from the law.  That’s the Myth of Tax Exceptionalism I discussed yesterday.

To achieve this trans-agency uniformity, Kristen looks at the words in the APA and gives them a strict, but abstract, meaning:  “legislative” means “force of law.”  She then applies that meaning to various agencies to whack them into conformity.  When she applies it to the Treasury Department she concludes that ALL Treasury regulations have the “force of law” and are, therefore, legislative for issuance purposes under the APA.  For that proposition she looks to the Supreme Court’s decision in Mayo as imbuing all Treasury regulations with that magic “force of law.” 

I certainly agree there are certain uniform principles of law that apply to all agencies.  The biggest one is “do what Congress tells you to do.”  I just disagree that the APA is the right place to start.  I believe one should start with the agency’s organic statute and the case law about that agency.  I start there because no lawyer actually practices something called “administrative law.”  Lawyers practice environmental law, or securities law, or SSA disability law….or tax law.  While Kristin and I might study “administrative law” in the abstract, that’s not how it works in the real world. 

I think the history of the APA shows that it was not intended to be a hammer.  It was not enacted to override or intrude on specific laws applicable to specific agencies.  I think the history of the APA supports reading and applying it not so much as a hammer as a safety net, providing a set of legal principles that agencies should follow.  But there are many ways to obey those principles.  Thus, it’s entirely possible that the APA applies differently to different agencies, depending on the agency’s organic statute.  You need to look at the history. That is particularly true for the Treasury Department. 

Kristin seems to say APA history does not matter, for two reasons.  First, she appears to believe that the APA wiped out all prior agency rules and practices.  It hammered out all that came before.  Second, as to tax administration, she appears to believe that the nature and function of tax administration has dramatically changed since the APA’s enactment.  The 1940’s and 1950’s are no longer relevant.  Specifically, she believes that the tax regulations are now more “oriented away” from revenue raising and “oriented towards” using tax laws to serve non-revenue social policies. She writes “Although the tax system has always served multiple goals, recent decades have seen a dramatic escalation in tax programs and provisions serving purposes other than traditional revenue raising.” “Administering the Tax System We Have,” 63 Duke L.J. 1717, 1728 (2014). 

I disagree with Kristin on both counts.   It’s part of what I call the “Myth of Change”  that I mentioned yesterday.  First, I think it is critical to understand that Treasury was promulgating regulations long, long before the APA was enacted.  The APA was enacted on top of an existing tax guidance structure.  Second,I think tax administration has always been an exercise in balancing revenue raising needs with social policies.  To be sure, the particular social policies that Congress wants to affect through taxation have changed over time, but not the use of the tax laws to do more than raise revenue.   I have not seen convincing evidence that Congress is using the tax laws now more than ever for social policy as opposed to revenue raising.  That’s the Myth of Change.

1. Tax Regulations Came Before The APA

The APA, 60 Stat. 237 was enacted June 11, 1946.  It resulted from the Attorney General Office’s monumental study of federal agencies, published in a famous 1941 Final Report.  That Report is still highly influential on how courts apply the APA. see Joanna Grisinger,  Law in Action: The Attorney General’s Committee on Administrative Procedure, 20 J. of Policy History 379 (2008) (reviewing the influence of the Final Report on the APA).  The Final Report, in turn, grew out of a detailed study of then-existing agencies, a study contained in 27 Monographs written by staff, each running hundreds of pages.  Each one is a book.  Monograph 22 focused on the tax administration, back at a time when the IRS was called the Bureau of Internal Revenue (BIR).

Our understanding how the APA applies to tax regulations should thus start in the 1940’s because unlike chicken and eggs, we actually know what came first: tax regulations!  And then, yes indeedy, we need to see whether tax administration or general principles of administrative law have changed so much as to require a change in that relationship. 

What lessons do we learn from this history? 

(a) The APA was not intended to be a hammer. 

The AG’s Committee “had initially hoped to be able to suggest uniform rules for agency practice” similar to the Walter-Logan bill that Congress had passed and President Roosevelt had vetoed. Final Report at 22 (emphasis supplied).  That’s what Kristin wants.  In light of the information produced in the 27 monographs, however, the Final Report backed away considerably from that aspiration and instead prescribed a general framework for balancing the goals of agency efficiency and autonomy with the goals of agency transparency and protection of individuals from arbitrary agency actions.  See generally, Roni A. Elias, The Legislative History of the Administrative Procedure Act, 27 Fordham Envtl. L. Rev. 207 (2008)(nice short student note). 

That is why the resulting APA was widely understood as standing for the proposition that “procedural uniformity was not well suited to the administrative process.” Grisinger, supra, at 402.  That is, the APA provided generalized standards for controlling administrative actions rather than detailed and strict prescriptions.  

As enacted, the APA incorporated broad conceptual principles of administrative law.  Fundamentally was the binary notion of what agencies did.  Agency action was either an “adjudication” or a “rulemaking.”  Roughly speaking, rulemaking was forward-looking, the process of creating some kind of general statement that would apply to a broad set of situations in the future.  In contrast, adjudication was backwards-looking, the process of applying the law to an existing set of facts. 

As to rulemaking, the APA created large conceptual baskets for types of rules, with associated procedures for their issuance.  Again, as Jack Townsend properly noted and as I discussed yesterday, the APA says nothing about what weight various types of rules should carry with the courts.  The default issuance procedure was notice-and-comment.  Some regulations had to go through a more formal process, but only when Congress specified by using the magic language “on the record after a hearing.”  United States v. Florida East Coast Ry., 410 U.S. 224 (1973).  And other regulations could be issued with less formal process if they were either “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice” or if the issuing agency had “good cause” to find that “notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”  5 U.S.C. §553(b).  These foundational concepts were roomy enough to accommodate a wide variety of guidance modalities. 

Let’s see what lesson we can find about tax guidance.

(b) Treasury Regulations were not believed to require notice and comment for issuance. 

The contemporary view in the 1940’s was that existing issuance procedures were consistent with this new “constitution” of administrative law.  The concerns expressed in the Final Report related mostly to the new agencies created by the New Deal, agencies that “have been devised by Congress under the pressure of events for the exercise of new powers in new fields.” Final Report at 213 (emphasis supplied).  Thus, nothing in either Monograph 22 nor the Committee’s Final Report suggests there were concerns with Treasury regulations.  Far from it.  Monograph 22 acknowledged that the “considerable history” behind the BIR made it a very different subject from other agencies “which are working in areas only recently occupied by the Federal Government.” Monograph 22 at 146.

The writers of Monograph 22 discuss in some detail the issuance of a variety of tax guidance documents.  They were fine with the then current process.  Public hearings?  That “would probably be of small practical value, since the problems to be studied are of a highly technical or “legal” character…” Id. at p 147.  Moreover, “time…is often a problem.”  Id. at 146.  Well, Duh!  The writers suggested notice and comment would be appropriate “when time allowed.”  Id.  Thus, the vision was that Treasury Regulations would normally be issued without notice and comment unless time allowed or other circumstances required.  When the writers did express concerns about agency guidance, it was with sub-Treasury guidance being too prolific and de-centralized. Id. at 150-156.  Anyone reading Monograph 22 today will find it very familiar: what was true then is largely still true today. 

Given this history, it is not surprising that the common view was that the APA did not require Treasury to issue most regulations through notice-and-comment process.   That, perforce, meant the rules should be classified as interpretive.  The great administrative law scholar Kenneth Culp Davis reflected this general understanding.  Writing in 1959 for law students, he explained that “the great bulk of Treasury Regulations under the tax laws clearly are interpretative rules, not legislative rules, despite the provision of §7805….  Without the grant of power by §7805, the power of the Secretary or his delegate would be the same…” Administrative Law Text (Foundation Press Hornbook Series) (1959) at 87.   

Again, to reiterate Jack’s point: the APA is notoriously silent on the extent to which a court must follow agency rules when deciding a dispute.  While §706 instructs the reviewing court to “decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action,” that directive is silent on the effect of agency guidance on the court’s task.  The general understanding in 1946—expressed in the influential Attorney General’s Manual as well as elsewhere—was that the APA neither added to nor subtracted from the law of judicial review as it had developed to that point, but instead was only a restatement of existing law.

Into this silence post-APA tax cases continued the pre-APA approach of evaluating tax guidance depending on the level of authority behind its issuance.  Under that view, pre-APA case law had long of distinguished between Treasury and sub-Treasury guidance.  The post-APA case law continued that distinction, with no discussion of how the Treasury regulations were issued.  For example, in 1948 the Supreme Court considered the validity of a regulation that required taxpayers using the installment sale rules to compute deductions consistently with income.  In its opinion, the Court said nothing about whether the recently enacted APA now required changes in how regulations were issued.  Instead, it just went ahead and explained the proper level of deference to be given, proposing this standard: “Treasury regulations must be sustained unless unreasonable and plainly inconsistent with the revenue statutes and…should not be overruled except for weighty reasons.” Commissioner v. South Texas Lumber Co. 333 U.S. 496, 501 (1948).  Hmmm.  Sounds a lot like Chevron!  And Mayo.  And just as in those opinions, the Court’s South Texas Lumber opinion makes no linkage between how the Treasury regulations were issued and the level of deference accorded them.  ‘Cause that was a different issue.

Lower courts as well continued to distinguish Treasury guidance from sub-Treasury guidance, just as they did in pre-APA.  Post APA decisions repeatedly follow the pre-APA approach that sub-Treasury guidance “not promulgated by Secretary” did not have the same weight with courts as Treasury regulations in interpreting tax statutes.  See, e.g. Biddle v. Commissioner, 302 U.S. 573 (1938), 383  (1938); Helvering v. New York Trust Co., 292 U.S. 455, 468 (1934).  But again, these cases do not turn on how the guidance was issued.  They turned on who was issuing it: Treasury or IRS. 

The proper application of the APA to tax administration must therefore start with the recognition that, at the time of its enactment, tax administration was generally considered to be obedient to the APA’s restatement of basic administrative principles.  The APA’s statutory language did not require any changes to how tax guidance was issued or how it was evaluated by courts when adjudicating tax disputes. 

2.  Tax Administration Is Same As It Ever Was

Kristin properly pushes back that the analysis cannot end there.  The next step in the analysis, is to see what post-APA events might have changed this relationship between the APA and tax administration.  Hmmm.  Well….certainly the language of the APA has not changed. The concepts are still broadly defined.  They still do not imagine that only documents titled “regulations” are agency rules subject to the APA, nor do they imagine that every agency document titled “regulation” is a rule that must either be issued in the same way as all other agency rules or that ought to receive the same kind of judicial deference as all other similarly-titled guidance.  These are roomy concepts.  So the inquiry is whether either tax administration or judicial interpretation of the APA, or both, have changed in a way that creates a different relationship between the APA and tax administration. 

We’ll save that inquiry for a different post, next week. 


  1. Joseph M. Erwin says

    I am reluctant to get into the middle of a squabble among academics but I think the professorial class doesn’t always see what’s going on with tax practitioners – and no one else has piped up.
    Given that the IRS has such a smorgasbord of guidance – announcements, notices, revenue rulings, revenue procedures, “frequently asked questions,” form instructions, temporary regulations, proposed regulations, and final regulations, each of which it has at one time or another asserted as law – the concept of merely interpretive regulations is quaint. Consider not filing a Form 8275-R Regulation Disclosure Statement because your position is only contrary to a regulation you think is “interpretive.” The regulation on disclosure to avoid the accuracy-related penalty provides:
    “The term ‘disregard’ includes any careless, reckless or intentional disregard of rules or regulations. The term ‘rules or regulations’ includes the provisions of the Internal Revenue Code, temporary or final Treasury regulations issued under the Code, and revenue rulings or notices (other than notices of proposed rulemaking) issued by the Internal Revenue Service and published in the Internal Revenue Bulletin.”
    Treas. Reg. § 1.6662-3(b)(2)(emphasis added). There is no exception for “interpretive” regulations. At what level of confidence could one write a tax opinion that a notice or ruling was not a “rule or regulation” within the meaning of section 6662 and the accuracy-related penalty?
    Also, Professor Camp writes:
    “I have not seen convincing evidence that Congress is using the tax laws now more than ever for social policy as opposed to revenue raising. That’s the Myth of Change.”
    I refer the professor the alphanumeric soup of Code sections concerning credits and deductions for special items and special inclusions or exclusions of income: sections 24, 25A, 25C, 25D, 30B, 30C, 30D, 36, 36B, 40A, 41, 42, 43, 44, 45A, 45A, 45D, 45F 45L, 45Q, 48A, 48B, 48C, 59A, the several enterprise and Opportunity zones statutes, etc. And we can’t forget the Patient Protection and Affordable Care Act. See National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012)(shared responsibility payment for health insurance is a tax). Most of these have been added in the last 30 years.

    • Great points Joseph!

      First, thank you so much for taking the time and energy to both read and respond!

      Second, I think you’ve put your finger on why us academics are squabbling. We have no billable hours and no clients demanding a particular result and so we can (hopefully) add value to what practitioners do by giving a use analytical framework.

      Third, I also agree with you that Congress has increased use of tax credits to further economic policies and social policies. But I see those as differences in quantity and not differences in kind. So, yeah, there are more tax credits and deductions for the IRS to give guidance on, but the quality of the guidance remains the same: how to help taxpayers understand the tax consequences of their non-tax actions. Lots of social policies in the charitable deduction area, for example. If that means that administrative guidance on what qualifies as a donation, or a qualified charitable organization, is a “social policy” regulation then the IRS has been doing that since 1913 and, actually, since 1862. I encourage you to read Monograph 22 and you will see many of the concerns you raise expressed there as well, particularly the concerns about what we now call sub-regulatory guidance.

      Fourth, The concept of “Interpretive” regulation is no more or less quaint that the concept of “legislative” regulation. We both might prefer that Congress amend the APA to change those terms. But until that happens, I’m afraid we are stuck with the law as it is, so we must wrestle with these quaint concepts. I just am concerned that applying the quaint concept of legislative rule to ALL Treasury regs greatly disables the IRS from giving timely guidance to taxpayers who are trying to report their transactions correctly and would really like to know how to do that. As someone who used to actually write regulations in Office of Chief Counsel, I think mine is a valid and practical concern. Not really academic.

      Finally, as to your excellent point about penalties, that is one of the big reasons I think Kristin and others want to apply that quaint concept of legislative rule to ALL Treasury regulations (and, by easy extension, almost all of what we now call “sub-regulatory” guidance). I personally think Congress has gone way overboard on penalties. But the basic penalties have always been there and have ALWAYS been available for the government to use. Look at section 7203 for example. That’s been there since forever. So if the mere potential of penalties or criminal sanctions was sufficient to turn EVERY single piece of guidance into a “legislative rule” (which is how I read both Kristin’s analysis and, more importantly, how I read the tea leaves in the Supreme Court’s recent opinion in CIC Services, where the mere possibility of criminal prosecution in 7203 was a factor in Justice Kagan’s opinion), then there is very little tax guidance which is not “Legislative” in character. Including computer coding. I think the reasoning “potentially subject to penalties, ergo legislative” is far too crude and reductionist a basis for analysis. And if you have any memory of your Civil Procedure studies, you may recall a debate between Justices Warren and Harlan in the Hanna v. Plumer case very similar to the debate Jack and I have with Kristin here.

      Cheers, -bryan

    • Jack Townsend says

      Joe, I am not sure what you mean by the 2nd paragraph (starting “Given that.” I don’t think the legislative-interpretive distinction bears on Form 8275-R. The Form asks about positions that are contrary to all Treasury regulations (without regard to the legislative-interpretive distinction) and offers a “safe-harbor” from certain penalties for positions with a reasonable basis that are disclosed. I don’t think the failure to file the Form 8275-R itself is penalized; rather the underlying conduct is penalized. And, if the underlying conduct violates a valid interpretive regulation (in the sense that Bryan and I use it), I think the taxpayer may be penalized.

      For example, assume that the interpretive regulation adopts an interpretation that all would agree is the best interpretation of the statute. Even without the regulation, the interpretation would apply to the statute. If the taxpayer violates that interpretation (whether in a regulation or not), the taxpayer can be penalized for that conduct (not the failure to file the Form 8275-R).

      I guess the only issue in Kristin’s imagination would be if the interpretation were not the best interpretation but is given Chevron deference so that the “less-best” interpretation controls for purposes of the penalty. (BTW, that is a rare phenomenon, which is overblown in the ranting, some politically charged, about Chevron.) I suspect that a court facing that phenomenon would strongly consider the ambiguity in the statute in determining whether the taxpayer is subject to the underlying penalty. But, again, that has nothing to do with the APA distinction between legislative and interpretive regulations.

  2. Jack Townsend says

    Greeat post, Bryan. Reminds me of this from my article (p. 18):

    The history of the distinction between legislative and interpretive regulations is critical to understanding the distinction today. It is not much of a stretch to offer here Justice Oliver Wendell Holmes’ famous quote from a tax case that: “a page of history is worth a volume of logic.” n84 As Professor Bryan Camp proclaimed: “Those who write in this area must not fall into the presentist fallacy of assuming that the terms of the APA contain meaning independent of history and of the administrative context to which they are applied.” n 85

    n84 New York Trust Co. v. Eisner, 256 U.S. 345, 349 (1921). I do not mean in offering the quote to suggest that the page of history offered in this article is in any way inconsistent with the logic of the APA; the page of history simply establishes what the relevant logic of the APA is.
    n85 E.g., Bryan T. Camp, A History of Tax Regulation Prior to the Administrative Procedure Act, 63 Duke L.J. 1673, 1714-15 (2014);see also Stephen G. Breyer, et al., Administrative Law and Regulatory Policy:Problems,Text, and Cases 273 (7th ed. 2011) (“It is difficult, however, to understand Chevron without having a sense of what preceded it.”); and Richard Murphy, Pragmatic Administrative Law and Tax Exceptionalism, 64 Duke L.J. Online 21, 34 ff (2014) (urging a “Due (and Pragmatic) Regard to History”).

  3. Jack Townsend says

    Bryan, a quibble.

    You claim (in bold-face) “(b) Treasury Regulations were not believed to require notice and comment for issuance” is too boldly stated. Treasury legislative regulations such as the consolidated return regulations under § 1502 required notice and comment, certainly under the APA from the inception. Treasury interpretive rules (including interpretive regulations) were “not believed to require notice and comment and comment for issuance,” hence the APA exemption of interpretive rules from the notice and comment requirement. 5 USC 553(b)(A). You know that and perhaps were just exuberant in the claim I address here.

    I think you recognized that distinction in your later statement that “Given this history, it is not surprising that the common view was that the APA did not require Treasury to issue most regulations through notice-and-comment process.” Focus on the word “most.” Thus, most Treasury regulations then and now are interpretive regulations deriving authority only from § 7805(a). Most but not all regulations, because legislative regulations are required to undergo notice and comment (or “good cause” for immediate and not retroactive effect).

    Keep up the good work!

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